with a decision. Another impact isthat the trader needs more infor-mation to understand if the instru-ment being traded is subject to pre-and post-trade transparency.”The challenges, potential impactsand unintended consequencesof the SI regime pose anotherquestion for market participants.Is there any benefit to registeringas an SI?

The buy-side is notorious for its
wait-and-see regulatory approach
and it would appear this has not
changed with regards to SIs. The
reporting and transparency requirements are a hot topic for asset
managers who historically haven’t
been burdened with the task.

“For the buy-side guys who are
hesitant on the issue, the point we
try to make, because the buy-side
does have a burden they want to
minimise, is they should consider
the regime strategically and from
the perspective of a revenue opportunity as opposed to the defensive
perspective,” says Dermot Harriss,
senior vice president at OneMar-ketData.

A political failure

Industry experts have also suggested the regime could bring about
improvements to price, meaning a
newly established dose of healthy
competition based on the allure of
quotes for different instruments.

“If the SI regime really does take
off through 2018 we could start
to see competition based on the
attractiveness of the quotes. SIs
offering price improvement could
potentially have an advantage
over trading venues restricted by
a harmonised minimum tick size,”
says Anne Plested, head of the EU
regulation change programme at
Fidessa.

However, Mark Pumfrey, headof EMEA at Liquidnet, says theregime will not only cause priceimprovement but also benefit theanalysis of trading venues. Theregime will produce useable dataon the depth of liquidity and pricequotes and offer an insight intohow each SI operates, ultimate-ly helping meet compliancefor MiFID II’s best executionrequirements.“In the end it comes back tovenues analysis, SIs can quoteon what they want but it’s theexecution that matters. That’sall we will be interested in if wego to SI venues,” Pumfrey says.Kay Swinburne MEP ad-dressed delegates in a keynotespeech at the TRADE’s MiFIDII pop-up event and explainedinstitutions should considerthe spirit of the regulation and theprinciple of the rules when explor-ing the specifics of SIs.She said it’s easy to focus on thedetails and forget the overarchingprinciple of MiFID II and bestexecution is at the heart of this.

“The compromise is clear…we are
trying to persuade people to move
onto the lit space and we would
expect more transparency rather

than less. It would be deemed as a
political failure otherwise.

“MiFID II should be making
markets more transparent and
providing a better environment for
all investors,” she said.

“I would expect people to continue toprogress and use extra time to implementmore strategic solutions.”